Credit Limit Cut? Here’s How to Fight Back

It’s no secret – credit card companies are yanking credit from consumers (see here,here, and here). And, according to one analyst at Oppenheimer, the worst is yet to come: Another $2 trillion in credit lines is likely to be pulled in the next 18 months. Ouch.

But you might not have to shred your plastic quite yet. If you’re facing lower credit limits, higher interest rates or receiving word that your account’s being closed out, you can do a few things to fight back. (Remember, you’re doing this to save your credit – not continue spending.)

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Go ahead. Make the call.

First, pick up your phone, says Carol Kaplan, a spokeswoman for the American Bankers Association. “A lot of it is just talking to them,” she says. Kaplan recommends asking why the bank took action on your card. There could have been an administrative snafu or you may have a legitimate excuse for that one late payment eight months ago (that emergency appendectomy kept you from your checkbook, for example).

According to Chase spokesman Paul Hartwick, “The customer may be able to share other information such as salary or other details which may enable us to increase the credit line.” Hartwick wrote in an e-mail that Chase is “continuously evaluating whether our customers’ credit lines are most appropriate for the customer and his or her needs.” Citibank also said in an e-mail it “may seek to resolve the customer’s issues,” depending on the customer’s account history.

If you’ve been a good customer, paying on time for a long time, say so. But don’t feel too tied to the card company. Chances are you’re still getting some credit card offers in the mail, and now may be the time to use them as leverage. Threaten to leave your current provider, pointing out the better rates their competitors are offering. If you haven’t gotten solicitations, check out Credit.com, CardRatings.com or Bankrate.com to see what you’re missing.

“If your issuer is playing those games with you, through no fault of your own, it’s time to shop around,” says Greg McBride, senior financial analyst at Bankrate.com. “There are plenty of fish in the sea.”

Now may also be a good time to pick up another card on top of the one you have.

“In normal times, I never would have advised someone to go out and get another credit card,” says Gail Cunningham of the National Foundation for Credit Counseling. “But you don’t know what your existing provider is going to do to you tomorrow.”

Because card companies don’t want to carry as much potential for default, they’re slashing card limits. That means someone who used to have a $5,000 credit limit and spent $3,000 every month was well within the limit. But now they may be hitting their heads on the ceiling of a $3,500-a-month limit, which leaves them with an ugly “credit utilization ratio” (the amount owed relative to the credit limit). Cunningham recommends utilizing less than 30% of your card limit, which could be difficult if your limit’s been cut. Using a second card to spread your purchases thinner will help keep that ratio low, an important factor in keeping your credit report spiffy.

Restoring a high credit limit is a great goal, says Bankrate.com’s McBride, but not if you’re doing it just to take on added debt. Tell your card company you want to maintain your pristine (or improve your lackluster) credit score and you’d threaten that number by having a lower limit. They’ll respond better to that than to whines about wanting a new TV.

Finally, if your interest rates have spiked and you can’t switch to a better card, try to “opt-out” of the new rate. That means you’ll pay off your current balance at the existing rate, but you may not be able to make new purchases anymore. Ask your card carrier for details.

Comments (5 of 14)

Hello there. Sorry for remaining just a little off-topic, but what system is this site construct on? I need to construct some thing equivalent.

8:17 pm August 6, 2009

Stan W wrote :

BOA customer for 10 years $80,000 in 2 business credit lines. Never late. Balances around $20,000 and I signed a contract to import a $40,000 container of products from China. When I went to pay, I got the notice that my accounts were capped at $22,000. BOA put me out of business, now unemployed and just raised my personal credit card interest to 20%.

2:48 am July 23, 2009

ken w wrote :

I was a Bank of America credit card customer for 20 years and I am a BofA shareholder. I had a credit line of $22,000 and it was near maxed out. I was making the minimum payments because I had a good rate. Then one day, BofA jacked up the interest rate to 30% for no reason. I called them and asked them to lower the rate but they refused. So I did some balance transfers and used my cash savings to pay it down to $0.00. Then BofA cancelled the card altogether. I called them back and asked them to reinstate the card and they refused. I applied for other cards and I got rejected because my available credit vs used credit was too low. I was never late and I never missed a payment. What do I do?

7:10 pm June 30, 2009

Bert wrote :

I am in the mortgage business on commission-I have always had excellant credit even though the income fell. I applied for a new card wanting a minimal line for company expenses only-they shared the info with an affiliate who promptly cut my credit limits dramatically-on 31 cards -1 from $28,000 to $1,000-my balance is $995. So now on all 3 cards it looks like I have pushed them to the max, I called and explained I knew this would hurt my fico-bottom line they don't care. Where is justus in always making your payment as agreed???l

3:21 pm June 11, 2009

Peter wrote :

If you make "a couple of hundred" per day, how can you have made "290k in just 2 1/2 months"?